Chr. Hansen sees strong start to year as sales channels and supply chains recover

13 Jan 2022 --- Chr. Hansen is reporting a “stronger-than-expected” start for its Human Health business in its Q1 2021/2022 results. The Denmark-based company says this is driven by market rebound.

“[Another aspect making an impact] was customer wins, which reflect positive customer reception of our expanded probiotics portfolio and Strain-to-Solution capability. This was enabled by strong supply chain performance,” Christian Barker, executive vice president of Health & Nutrition at Chr. Hansen, tells NutritionInsight.

“We also saw very strong growth in human milk oligosaccharides (HMOs) and solid growth in Animal and Plant Health, though part of that was related to order timing,” he explains. 

Overall, Chr. Hansen’s revenue rose 10% from Q1 2020/21 to €268 million (US$307 million). Organic growth was 9% driven by volume growth. 

Specifically, the Lighthouses (Bioprotection, Fermented Plant Bases, Plant Health and HMO) delivered 35% organic growth combined, while the remaining Core businesses delivered 7% organic growth.The 2025 strategy is based on the Reinvest, Leverage and Extend pillars. 

Probiotics rebound amid volatile market
Honing in on Health & Nutrition, the section’s Q1 2021/22 revenue amounted to €90 million (US$103 million), up 16%. 

In Human Health, growth was supported by increased activity in the traditional sales channels in Europe, positive timing of orders delayed from Q4 2020/21, new customer wins and easing supply constraints.

Health & Nutrition’s organic growth was 13% driven by volume. The company notes the global probiotic supplements market benefitted from a rebound in the traditional sales channels in North America and Europe, while growth in the online sales channels remained strong.

However, Chr. Hansen expects that markets will remain volatile. 

“Times continue to be uncertain with higher volatility from COVID-19, which continues to impact consumer behavior, channel dynamics and our ability to physically meet with customers,” says Barker.

In response, Chr. Hansen plans to work even closer with its customers to respond to market developments. “That said, above all, we are highly focused on ensuring business continuity and safeguarding ability to supply through this volatile period,” Barker adds. 

Chinese birth rates impact infant formula
Meanwhile, the market for infant formula remained negatively impacted by reduced production volumes and lower birth rates, especially in China. Notably, China began allowing couples to have up to three children last year, but industry flagged that this was unlikely to have a significant impact on the infant nutrition sector.

However, Barker notes that the penetration of HMOs into infant formula is very low. “We expect strong growth as customers add HMOs to their IF products to bring it closer to mother’s milk in composition.”

Chr. Hansen further reports that the market for HMOs in infant formula developed favorably, driven by launches in North America.Chr. Hansen is also rolling out its science-based climate targets to reduce its carbon footprint toward 2030.

Jennewein acquisition continues to have influence
However, EBIT bsi in Health & Nutrition was at the Q1 2020/21 level due to a negative impact from the acquisition of HMO producer Jennewein. The acquisition closed in October 2020, which was only partly reflected in Q1 2020/21. 

Nonetheless, it had a minor positive impact on revenues this quarter, which grew by 3%. Overall, the HMO sector saw “very strong” growth, driven by consumer launches in North America. 

“With our acquisition of Jennewein, we have built a strong position in the HMO space, where we expect high growth as we look ahead. Probiotics and HMOs both play a role in modulating the human microbiome so strategically, this broadens our customer relevance as a microbiome-focused player,” says Barker. 

Meanwhile, Chr. Hansen’s overall EBIT margin bsi was 24.4%, down from 25.2% in Q1 2020/21. 

Production efficiencies and scalability effects from the solid sales performance were offset by higher input costs not yet reflected in the sales prices, a general ramp-up of activities including travel and the full inclusion of HMO.

Outlook unchanged
The outlook for 2021/22 remains unchanged from the original guidance provided in October.

• Organic growth is expected in the range of 5-8%.
• EBIT margin before special items is expected to be 27-28%.
• Free cash flow before special items is expected to be around €140 million to €170 million (US$160 million to US$195 million).

The company also emphasizes that the progress across all business areas and strategic initiatives underlines the strength of its 2025 strategy, which positions Chr. Hansen as a bioscience company focused on microbial and fermentation technology platforms.

Developing the strategy
The strategy is based on three pillars:

• REINVEST in the core platforms Food Cultures & Enzymes and Health & Nutrition.
• LEVERAGE the technology platform to develop solutions for new applications and end markets.
• EXTEND the technology platform through acquisitions and the expansion of the R&D partner network.

For example, under REINVEST, the company recently published a study showing the favorable impact of Bifidobacterium BB-12 on infants with colic symptoms, while the roll-out of The Probiotics Institute continues.

Meanwhile, for EXTEND, this quarter has seen continued execution of the strain-to-solution strategy for Human Health.

Chr. Hansen says it has reaped the benefits from the acquired probiotics businesses by expanding the customer base in different segments and through different channels. Notably, HMO benefited from customer launches of the 5HMO mix in North America.

By Katherine Durrell